TOKYO - The Bank of Japan held fire yesterday on more stimulus as it noted a pick-up in the economy, despite flat-lining inflation that has defied a two-year-old monetary easing programme.

In a widely expected move, the central bank said it would stand pat on a record 80 trillion yen (S$869 billion) annual asset-buying scheme meant to jack up prices and kick-start growth.

It also said it would issue more frequent and detailed reports on its economic and price outlook, while cutting the number of policy meetings to eight a year.

Traders are awaiting a regular news briefing from central bank chief Haruhiko Kuroda, whose comments last week about yen weakness sparked a short-lived surge in the currency. He later backtracked on the comments.

The yen's decline has helped local exporters, but pushed up the cost of imports and eroded consumers' purchasing power.

In forex trading yesterday, the greenback bought 122.99 yen - little changed from before yesterday's statement.

"Japan's economy has continued to recover moderately," the bank said yesterday, following its two-day meeting.

Policymakers noted an improvement in exports, factory output and capital spending. Tokyo has pushed firms to raise wages in a bid to stimulate consumer spending, after a sales tax hike last year sent Japan into a brief recession.

"Against a background of steady improvement in the employment and income situation, private consumption has been resilient, and housing investment has started to pick up," the bank said.

Economists expect a further loosening of monetary policy, probably later this year, to bring Japan nearer its 2 per cent inflation target - a cornerstone of Prime Minister Shinzo Abe's drive to overcome years of deflation.

The near-zero inflation rate is far below the central bank's target. Earlier this week, Japan reported a sharp drop in its May trade deficit, but still-lacklustre shipments overseas failed to offset a fall in energy imports.

AGENCE FRANCE-PRESSE